Market Insight

Germany approves Deutsche Telekom vectoring plan with conditions

November 24, 2015  | Subscribers Only

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The German telecoms regulator Bundesnetzagentur (FNA) has approved Deutsche Telekom’s use of vectoring on its copper (PSTN) network; on condition it gives its competitors fair access to the new technology.

  • The draft decision states that Deutsche Telekom (DT) must give competitors access to the technology, although this can be denied in areas where alternative networks are already available.
  • The incumbent plans to spend some €1 billion ($1.1 billion) on the upgrade before 2018, which will allow it to offer broadband download speeds of up to 100 Mbps.
  • The German government has set a target of bringing broadband download speeds of at least 50 Mbps to all households by 2018.

Our analysis

DT revealed in March 2015 that it planned to extend its vectoring rollout to an additional 5.9 million homes, covering over 80% of its German network by 2018. The technology effectively makes it possible to double the bandwidth of the individual PSTN lines, increasing the capacity of the “last mile” part of the network to the home from fibre-connected exchanges and central distribution points.

The advantage of the technology is that it is far cheaper to deploy than direct fibre-to-the-home (FTTH) connections, but will allow DT to significantly increase its network capacity and broadband download speeds, allowing it to compete more effectively with its cable rivals. The German government has estimated that in the next 20-25 years as much as €80 billion would be needed to roll out a nationwide German FTTH network, compared with just €1.1 billion for this upgrade.

The FNA’s draft decision is conditional on DT giving its competitors, which include xDSL operators United Internet, Telefónica’s O2, and Vodafone, virtual unbundled (VULA) access to the technology - although the incumbent can deny access in areas where alternative networks (not owned by DT) are already available. The technology can only be installed by one operator in each street cabinet, under the ‘first mover’ principle whereby the first one to the street cabinet gets to install - after which the new infrastructure can be used by all operators. The FNA’s president Jochen Homann said the proposal is a “fair compromise,” adding that the regulator wants to “…push broadband expansion while ensuring fair competition for the future that benefits consumers and enables fair and reliable conditions to companies for their investments”. The regulator further added that DT would be expected to live up to its vectoring pledges or face "drastic” fines or penalties.

DT and Germany’s xDSL operators are facing an increasing challenge from the cable sector, which is able to offer superior download speeds. Total cable broadband subscriptions jumped nearly 14% year-on-year (y/y) in Germany to reach 6.2 million at the end of June 2015. Total cable broadband subscription market share increased to 20.7%, up from 18.9% at the end of June 2014. This growth follows consolidation in the sector, with Liberty Global buying into Unitymedia in 2010 and subsequently acquiring KabelBW in 2011, merging the two under the Unitymedia banner. Meanwhile, Kabel Deutschland (KD) was acquired by Vodafone to boost its multiplay service and add to its fixed-line infrastructure.

DT comfortably leads the German fixed broadband sector, with a subscription market share of 41.7% at the end of June 2015, followed by United Internet (14.2%), Unitymedia (10.0%), Vodafone (9.3%), KD (9.1%), and O2 (7.1%). However, DT’s share has fallen from 42.7% at the end of June 2014 and 44.3% a year before that, chiefly due to the gains in the cable sector. Competition is strong in the German multiplay sector, with DT and Vodafone offering all four services including mobile, while cable players KD and Unitymedia own MVNOs. O2 (Telefonica) significantly strengthened its mobile presence with the acquisition of E-Plus in 2014, making it the leading operator by subscriptions with a 38% market share at the end of June 2015.

Vectoring is becoming increasingly popular among Europe’s incumbents who are keen to maximise their PSTN assets. Although it is something of a short-term solution, vectoring gives operators a low-cost option to increase broadband speeds, allowing them to meet consumer demand and mitigate the huge cost of FTTH deployment. Telekom Austria was the first European incumbent to begin trialling the technology in 2013. Belgacom and DT followed, while Ireland's Eircom has committed to the technology, and the UK’s BT is also examining the technology as a means of maximising the capacity of its copper assets.


Deutsche Telekom
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